Greece and its bondholders have made little progress since resuming stalled talks on a debt swap, three sources close to the talks told Reuters on Thursday, as time to strike a deal and avoid a messy default runs out rapidly.
Nearly a week after talks hit an impasse, the two sides remain bogged down over the coupon, or interest payment, that Greece must offer on its new bonds under the swap.
Athens and its foreign lenders offered a coupon of just over 3.5 percent during a two-hour meeting on Wednesday, but bondholders rejected that as too low, one source said. They were angling for a coupon of at least 4 percent, the source said.
Negotiations between Prime Minister Lucas Papademos and Charles Dallara, head of the International Institute of Finance representing private bond holders, are due to resume again in Athens in the evening on Thursday.
A senior Greek official also played down speculation that terms of a deal had been nearly pinned down, saying: Nothing has been concluded yet.
The stakes could not be higher. The two sides must thrash out a deal within days to pave the way for Greece to receive a new infusion of aid and avoid bankruptcy when 14.5 billion euros (11.3 billion pounds) of bond redemptions fall due in March.
Even if a deal is struck rapidly, processing the paperwork will take weeks and Greece's official lenders, the European Union and the International Monetary Fund, have said the work must be cleared before Athens receives more international aid.
Kept afloat by bailout loans, Greece faces the threat of having to leave the euro zone and slumping into further economic and social misery if it fails to come to grips with its debt, including secure a deal with the private bond holders.
The bond swap deal is vital for clinching Greece's second, 130 billion euro rescue package and the EU/IMF lenders have warned Athens will not get any more funds without it.
The swap is aimed at cutting 100 billion euros off Greece's over 350 billion euro debt load by getting the private holders of Greek bonds to accept a 50 percent writedown on their notional value.
But terms of the swap - including the interest rate and maturity date of new bonds Greece would sell to the private creditors in place of old debt - have yet to be agreed.
The talks ran into trouble last week over Greek demands for an interest rate below the 4 percent that banks were willing to stomach and a plan to enforce losses on investors.
A lower interest rate would push the actual loss investors take to well above the 50 percent level initially envisaged.
A 3.5 percent coupon demanded by Greece and its lenders, for example, would imply a roughly 70 percent net present value loss for investors, according to the Reuters Breakingviews calculator.
Greece is stumbling through its worst post-World War Two crisis, with unemployment at record highs and near-daily protests, strikes and work stoppages against austerity measures that have deepened an already brutal recession.
Its latest bailout, together with structural reforms, aim to reduce Greece's debt to a more manageable 120 percent of gross domestic product in 2020 from about 160 percent now.
But speculation has grown that Greece may need further funds than those promised by partners, with a growing sense among some that Greece's current state of affairs is untenable.
Horst Reichenbach, head of the European Commission's task force to help rebuild the Greek economy, appealed to Europe for patience with the Mediterranean country, saying reforms were moving slowly but no miracles should be expected.
In Washington, an IMF spokeswoman said staff at the Fund had sought executive board approval for talks with Greece that might lead to a deal requiring exceptional access to IMF loans.
Greece already has exceptional access to IMF funding that allows it to draw more than 600 percent of its IMF quota and any further negotiations require fresh board approval.
The IMF is seeking to more than double its war chest by raising $600 billion in new resources to help countries deal with the fallout of the wider euro zone debt crisis, but the United States and other countries are throwing up roadblocks.
(Additional reporting by Lefteris Papadimas in Athens and Lesley Wroughton in Washington; writing by Deepa Babington; Editing by Jeremy Gaunt)